Tag: Cryptocurrencies

LONDON (Reuters) – After major crypto exchange FTX filed for U.S. bankruptcy protection on Friday, the crypto industry is bracing for further fallout.

Some of FTX’s investors have said they are writing their investment down to zero.

Other crypto firms may be exposed to FTX by having held tokens on the exchange or by owning FTX’s native token, FTT, which plunged around 94% last week.

While the extent of the contagion across crypto markets remains unclear, here are some firms who have given information about their exposure to FTX.

BINANCE

Binance Chief Executive Changpeng Zhao sparked concerns among investors on Nov. 6 when he said in a tweet that Binance would sell its holdings of FTT.

Zhao told a Twitter spaces event on Monday that Binance had previously held $580 million worth of FTT, of which “we only sold quite a small portion, we still hold a large bag”.

BLOCKFI

Embattled cryptocurrency lender BlockFi said it had significant exposure to FTX and that withdrawals from its platform continue to be paused.

“We do have significant exposure to FTX and associated corporate entities that encompasses obligations owed to us by Alameda, assets held at FTX.com, and undrawn amounts from our credit line with FTX.US,” BlockFi said.

In July, FTX had signed a deal with the troubled crypto lender to provide it with a $400 million revolving credit facility with an option to buy it for up to $240 million.

CELSIUS NETWORK

Bankrupt crypto lender Celsius Network said in a tweet on Nov. 11 that it had 3.5 million Serum tokens (SRM) on FTX as well as around $13 million in loans to FTX-linked trading company Alameda Research. The loans were under-collateralised, mostly by FTT tokens, Celsius said.

COINBASE

Coinbase Global Inc said in a blog post on Nov. 8 that it had $15 million worth of deposits on FTX. It said it had no exposure to FTT, no exposure to Alameda Research, and no loans to FTX.

It said it had $5 billion in cash and cash equivalents at the end of Q3.

COINSHARES

Crypto asset manager CoinShares has $30.3 million worth of exposure to crypto exchange FTX, CoinShares said in a statement on Nov. 10.

CoinShares CEO Jean-Marie Mognetti said that the group’s financial health remains “strong”, adding that its net asset value at the end of Q3 was 240.6 million pounds ($282.51 million).

CRYPTO.COM

Singapore-based crypto exchange Crypto.com said on Nov. 14 it had moved about $1 billion to FTX over the course of a year, but most of it was recovered and exposure at the time of FTX’s collapse was less than $10 million.

CEO Kris Marszalek said the firm would prove all naysayers wrong on the platform being in trouble, and that it has a robust balance sheet and took no risks.

GALAXY DIGITAL

Crypto financial services company Galaxy Digital Holdings Ltd said in its third-quarter earnings statement on Nov. 9 – the day after FTX froze withdrawals – that it had a $76.8 million worth of exposure to FTX, of which $47.5 million was “in the withdrawal process”.

In the earnings call, Novogratz said Galaxy had more than $1 billion in cash and $1.5 billion in liquidity.

GALOIS CAPITAL

Hedge fund Galois Capital had half its assets trapped on FTX, co-founder Kevin Zhou told investors in a recent letter, the Financial Times reported, estimating the amount to be around $100 million.

Galois did not respond to Reuters comment requests sent via email and its website.

GENESIS

U.S. cryptocurrency broker Genesis Trading’s derivatives business has approximately $175 million in locked funds on FTX, the company said in a tweet on Nov. 10.

“Genesis has no material exposure to FTT or any other tokens issued by centralized exchanges,” the firm said in a tweet on Nov. 9.

KRAKEN

Cryptocurrency exchange Kraken said on Nov. 10 that it held about 9,000 FTT tokens on the FTX exchange and was not affected “in any material way”.

Kraken also said on Sunday it had frozen the accounts of FTX, Alameda Research and their executives.

SILVERGATE CAPITAL CORP

Silvergate Capital Corporation said on Friday FTX represented less than 10% of $11.9 billion deposits from all digital asset customers as of Sept. 30.

The financial solutions provider to digital assets also said Silvergate has no outstanding loans or investments in FTX, and FTX is not a custodian for Silvergate’s bitcoin-collateralized Silvergate Exchange Network (SEN) leverage loans.

VOYAGER DIGITAL

FTX won crypto lender Voyager Digital’s assets in a $1.42-billion bid at an auction in September months after the lender spurned an earlier proposal and called it a “low-ball bid dressed up as a white knight rescue”.

Voyager said on Nov. 11 it had reopened the bidding process for the company and maintained a balance of approximately $3 million at FTX when the embattled crypto exchange filed for protection from creditors.

($1 = 0.8516 pounds)

(Reporting by Elizabeth Howcroft in London and Mehnaz Yasmin and Medha Singh in Bengaluru; Editing by Jan Harvey and Anil D’Silva)

By Chuck Mikolajczak

NEW YORK (Reuters) – A gauge of global stocks ended lower on Monday in choppy trade and U.S. bond yields rose as investors assessed comments from Federal Reserve officials to try and determine the central bank’s path of rate hikes.

Equities rallied last week and U.S. Treasury yields tumbled after consumer price data indicated stubbornly high inflation may finally be starting to slow and give the Fed room to dial back its tightening policies, pushing MSCI’s gauge of stocks across the globe to its biggest weekly percentage gain in two years.

But on the heels of the equity rally, Federal Reserve Governor Christopher Waller said on Sunday that though the central bank may consider slowing the pace of rate increases at its next meeting, that should not be taken as a “softening” in the fight to bring down inflation, and while the data was “good news” it was “just one data point.”

Stocks briefly erased early losses and turned higher, while bond yields moved off earlier highs after Vice Chair Lael Brainard said on Monday the central bank would likely slow its interest rate hikes soon, but emphasized the Fed still had more work to do.

“There is still a sensitivity to Fed speak… One was a little hawkish, one was a little dovish,” said Eric Kuby, chief investment officer at North Star Investment Management Corp.

On Wall Street, the S&P 500 fell after recording its biggest weekly percentage gain since June last week, led by declines in real estate and consumer discretionary shares. Amazon.com fell 2.28% after reports the online retailer is planning to cut around 10,000 jobs in corporate and technology roles.

The Dow Jones Industrial Average fell 211.16 points, or 0.63%, to 33,536.7, while the S&P 500 lost 35.68 points, or 0.89%, to 3,957.25 and the Nasdaq Composite dropped 127.11 points, or 1.12%, to 11,196.22.

The pan-European STOXX 600 index closed up 0.14% and MSCI’s gauge of global stocks shed 0.59%.

Investors will get another look at inflation when the U.S. producer price index is released on Tuesday, while a slew of Fed officials are scheduled to speak this week.

Benchmark 10-year notes were up 4.2 basis points to 3.871% from 3.829% late on Thursday. The bond market was closed for the Veterans Day holiday on Friday.

The two-year yield was up 8 basis points at 4.406%, from 4.326%.

In contrast, dovish comments from European Central Bank policymaker Fabio Panetta and Cypriot policymaker Constantinos Herodotou helped send European bond yields lower, although short-dated rates remained near multi-year highs hit recently.

Germany’s 2-year government bond yield was up 0.2 basis points at 2.118% from 2.116%, after climbing to 2.252% last week, its highest since 2008.

After its biggest weekly percentage drop since March 2020 last week, the dollar index rose 0.122% as the greenback relinquished earlier gains, with the euro down 0.23% to $1.0328.

U.S.-listed Chinese stocks gained on reports regulators have asked financial institutions to extend more support to stressed property developers amid signs the government may be starting to relax some of its strict COVID-19 policies. E-commerce firm Alibaba.com shares rose 0.79%.

U.S. President Joe Biden met Chinese leader Xi Jinping in person on Monday on the sidelines of the G20 summit, with both stressing the need for a better dialogue between their nations and the two sides establishing a mechanism for more frequent communications.

In cryptocurrencies, bitcoin fell 2.59% to $16,320.60 after falling below $16,000 for the first time since Thursday as investors continue to assess the fallout from last week’s collapse of crypto exchange FTX.

(Reporting by Chuck Mikolajczak; Additional reporting by Ankika Biswas and Lewis Krauskopf; Editing by Jan Harvey, Chizu Nomiyama and Rosalba O’Brien)

(Reuters) – Cryptocurrency lender BlockFi said on Monday it has significant exposure to Sam Bankman-Fried’s crypto exchange FTX, and associated entities, that last week filed for bankruptcy.

“We do have significant exposure to FTX and associated corporate entities that encompasses obligations owed to us by Alameda, assets held at FTX.com, and undrawn amounts from our credit line with FTX.US,” the company said.

(Reporting by Manya Saini in Bengaluru; Editing by Shailesh Kuber)

(Reuters) – U.S. prosecutors in New York are probing FTX’s collapse, a source with knowledge of the investigations said on Monday, after the crypto exchange filed for bankruptcy protection last week following a rush of customer withdrawals.

The downfall followed a failed rescue deal with rival exchange Binance, with FTX now facing scrutiny from U.S. regulators over its handling of customer funds, as well as its crypto-lending activities.

The U.S. Attorney’s Office in Manhattan declined to comment.

Reuters reported last week that at least $1 billion of customer funds have vanished from FTX, citing sources.

Cryptocurrencies have languished this year as higher interest rates and growing worries of an economic downturn cratered prices that eliminated key players such as Voyager Digital, Three Arrows Capital and Celsius Network.

But the bigger blow to digital assets came since FTX, which had developed a penchant for bailing out troubled crypto firms, showed early cracks. Bitcoin has slid below $16,000 for the first time since late 2020.

“Although investors have suffered significant losses, we believe this second “crypto winter” will be a net positive because the FTX collapse will edge the crypto ecosystem closer to the established financial sector,” Deutsche Bank analysts wrote in a note on Monday.

“The FTX crash spotlighted well-known structural issues in the crypto ecosystem: insufficient reserves, conflict of interest, a lack of regulation and transparency, and unreliable data.”

(This story has been corrected to remove reference to prosecutors with the Manhattan district of New York in headline and paragraph 1 and 3)

(Reporting by Chris Prentice in Washington and Mehnaz Yasmin in Bengaluru; Editing by Arun Koyyur)

(Reuters) – Recent losses in the cryptocurrency market show the need for cryptocurrencies to be regulated the same way traditional finance is, Fed Vice Chair Lael Brainard said on Monday.

“It’s really concerning to see that retail investors are really getting hurt by these losses,” Brainard said in an interview with Bloomberg in Washington.

Cryptofinance “needs to be under the regulatory perimeter,” she said.

(Reporting by Lindsay Dunsmuir)

(Reuters) – Digital currency futures and options clearinghouse LedgerX LLC submitted to the U.S. Commodity Futures Trading Commission a formal withdrawal of FTX’s request from December last year that sought to allow the crypto exchange to offer products that are not fully collateralized.

(Reporting by Chris Prentice in Washington and Mehnaz Yasmin in Bengaluru)

NUSA DUA, INDONESIA (Reuters) – Binance chief executive Changpeng Zhao said the cryptocurrency exchange plans to launch a fund to help crypto projects facing a liquidity crisis as the collapse of rival FTX ricochets through the industry.

The recovery fund will help “reduce further cascading negative effects of FTX,” Zhao said in a tweet on Monday, targeting projects that are “otherwise strong, but in a liquidity crisis”.

Binance, which abandoned a mooted rescue of FTX, did not immediately respond to a request for comment on the size of the planned fund.

The crypto industry is reckoning with the collapse of rival exchange Sam Bankman-Fried’s FTX, which filed for bankruptcy on Friday after users rushed to withdraw $6 billion in crypto tokens in just 72 hours.

Zhao said in a tweet on Nov. 6 that Binance would liquidate its holdings of FTX’s native token, FTT, which raised investor concerns about FTX’s balance sheet. Binance said on Nov. 8 it was considering a rescue deal for FTX, later abandoned after due diligence.

Earlier on Monday, Zhao called for new but stable and clear regulations for the industry, in light of recent developments and participants “cutting corners”.

“We’re in a new industry, we’ve seen in the past week, things go crazy in the industry,” Zhao told a gathering of G20 leaders at a summit in Bali. “We do need some regulations, we do need to do this properly, we do need to do this in a stable way.”

“I think the industry collectively has a role to protect consumers, to protect everybody. So it’s not just regulators. Regulators have a role but it’s not 100% their responsibility,” Zhao said.

Over the weekend, Zhao had tweeted that Binance had stopped accepting deposits of FTX’s FTT token on its platform, and urged other exchanges to do the same.

Zhao also said in a tweet on Monday that Binance “never shorted FTT”.

“We still have a bag of (FTT) as we stopped selling FTT after SBF (Sam Bankman-Fried) called me. Very expensive call,” he added.

(Reporting by Fransiska Nangoy and Gayatri Suroyo; Writing by Vidya Ranganathan; Editing by Jacqueline Wong, Kirsten Donovan)

By Ankur Banerjee and Vidya Ranganathan

SINGAPORE (Reuters) – Singapore-based crypto exchange Crypto.com’s chief executive said the firm will prove all naysayers wrong on the platform being in trouble, and that it has a robust balance sheet and took no risks.

Chief executive Kris Marszalek took questions in a livestreaming YouTube address, and also said the platform always maintained reserves to match every coin customers held on its platform.

“We will just continue with our business as usual and we will prove all the naysayers and there is (sic) many of these right now on Twitter over the last couple of days,” Marszalek said.

“We will prove them all wrong with our actions. We will continue operating as we have always operated. We will continue being the safe and secure place where everybody can access crypto.”

An audited proof of reserves report will be published within weeks, he said, and that the exchange did not engage in any “irresponsible lending products”.

The ‘AMA’ (ask-me-anything) came after investors took to twitter over the weekend to question a transfer of $400 million worth of ether tokens to another exchange called Gate.io on Oct. 21.

Marszalek had tweeted to say the ether was recovered and returned to the exchange, but that failed to calm a jittery market. The Wall Street Journal reported that withdrawals at Crypto.com rose over the weekend after Marszalek’s tweet.

“At no point were the funds at risk of being sent somewhere where we could not get it back. It happened over three weeks ago. It had nothing to do with any of the craziness that has been happening since FTX collapsed,” the CEO said in response to questions, which around 7,000 people watched live.

The cryptocurrency market is already on edge with the spectacular public collapse of FTX last week. FTX had gone from being one of the largest exchanges worldwide to filing for bankruptcy. A Reuters report found that at least $1 billion of client funds were missing from FTX.

“This has set the industry back a good couple of years in the reputation that we have built,” Marszalek said. “Trust was damaged, if not lost, and we need to focus on rebuilding trust.”

The movement of ether at Crypto.com was discovered by a user who dug through transactions after the company posted its cold wallet addresses online.

Crypto.com is among the top 10 exchanges by turnover globally, but smaller than FTX and market leader Binance. It made headlines in 2021 after it signed a $700 million deal to rename the Staples Center in Los Angeles as the Crypto.com Arena, and enlisted actor Matt Damon to promote the platform.

Marszalek said Crypto.com had 70 million individual customers worldwide, and had made revenues of a billion dollars in 2021 as well as in 2022.

The platform had moved about $1 billion to FTX over a year but most of it was recovered and exposure at the time of FTX’s collapse was less than $10 million, he said.

Asked about why the exchange had 20% of its reserves in the meme token Shiba Inu (SHIB), Marszalek said that was because reserves were a direct one-to-one reflection of client holdings and that SHIB and Dogecoin had been hugely popular in 2021.

(This story has been corrected to fix paragraph 14 to make clear FTX exposure was over a year, not earlier this year)

(Reporting by Ankur Banerjee and Vidya Ranganathan; additional reporting by Xinghui Kok; Editing by Jacqueline Wong & Simon Cameron-Moore)

By Vidya Ranganathan

SINGAPORE (Reuters) – The fallout from the collapse of crypto exchange FTX kept bitcoin and other cryptocurrencies under pressure on Monday, with market participants worrying about heavy withdrawals at Singapore-based exchange Crypto.com.

Crypto.com tweeted that its chief executive Kris Marszalek will go live on YouTube to answer questions around some transactions on the platform that had sparked speculation and fund withdrawals.

“A lot has happened in the last week and there are a lot of questions which we want to address,” the exchange said.

The questions around a transfer of a big chunk of ether tokens last month from Crypto.com to another platform were raised by an user who dug through transactions after the company posted its cold wallet addresses online.

While Marszalek tweeted to say the ether, worth about $400 million, had been accidentally transferred and was recovered, his comments failed to allay concerns in a market already on edge after the spectacular public collapse of FTX last week.

The Wall Street Journal reported that withdrawals at Crypto.com rose over the weekend after Marszalek’s tweet. Twitter users pointed to other transfers between some other smaller platforms and exchanges as possible evidence that they were leaning on each other to shore up reserves.

Bitcoin slid further to below $16,000, taking losses for the month to 22.5%, while FTX’s token was at $1.60 and down 94% in November. Crypto.com’s token Cronos has halved in the past week to $0.06.

“Trust is at a massive premium because of the transparency or lack of it in this industry. How do you assess which exchange to trust at the moment?” said Leonard Hoh, the Singapore-based Asia-pacific head of exchange BitStamp.

“In reality all firms are being tested on their ability to meet their obligations and compliance controls. The market is asking for real proof. Rather than assuming parties have been acting in good faith.”

Crypto.com is among the top 10 exchanges by turnover globally, but smaller than FTX and market leader Binance. It made headlines in 2021 after it signed a $700 million deal to rename the Staples Center in Los Angeles as the Crypto.com Arena, and got actor Matt Damon to promote the platform.

FTX CONTAGION

Meanwhile, the effects of the collapse of Bahamas-based FTX, which filed for bankruptcy on Friday after a rush of customer withdrawals and a failed rescue deal with rival exchange Binance, continued to affect markets.

Bahamas securities regulator and financial investigators are investigating potential misconduct over the collapse of cryptocurrency exchange FTX, the Royal Bahamas Police Force said on Sunday.

Bloomberg news reported exchange AAX had halted withdrawals.

Visa Inc, the world’s largest payments processor, said on Sunday it was severing its global credit card agreements with collapsed crypto exchange FTX.

Binance chief executive Changpeng Zhao meanwhile tweeted that the exchange had never short-sold FTT tokens.

Zhao abandoned a deal with FTX chief Sam Bankman-Fried (SBF) last week to buy FTX’s non-U.S. assets, precipitating the bankruptcy.

He has since warned of a “cascading” crypto crisis and on Monday called for clearer crypto industry regulation.

“Full disclosure: Binance never shorted FTT. We still have a bag of as we stopped selling FTT after SBF called me. Very expensive call,” Zhao tweeted.

(Additional reporting by Xinghui Kok in Singapore; Editing by Sam Holmes)

NEW YORK (Reuters) – Visa Inc, the world’s largest payments processor, said on Sunday it was severing its global credit card agreements with collapsed crypto exchange FTX.

“The situation with FTX is unfortunate and we are monitoring developments closely,” a Visa spokesperson told Reuters.

“We have terminated our global agreements with FTX and their U.S. debit card program is being wound down by their issuer.”

FTX and Visa had announced an expanded partnership in early October, including plans to introduce account-linked Visa debit cards in 40 new countries.

(Reporting by Hannah Lang; Editing by Jacqueline Wong)

By Jasper Ward

NASSAU, Bahamas (Reuters) – The collapse of cryptocurrency exchange FTX is the subject of scrutiny from government investigators in the Bahamas, who are looking at whether any “criminal misconduct occurred,” the Royal Bahamas Police said on Sunday.

FTX filed for bankruptcy on Friday, one of the highest profile crypto blowups, after traders rushed to withdraw $6 billion from the platform in just 72 hours and rival exchange Binance abandoned a proposed rescue deal.

In a statement on Sunday, the Royal Bahamas Police said: “In light of the collapse of FTX globally and the provisional liquidation of FTX Digital Markets Ltd, a team of financial investigators from the Financial Crimes Investigation Branch are working closely with the Bahamas Securities Commission to investigate if any criminal misconduct occurred.”

FTX did not respond to Reuters’ request for comment.

FTX’s newly appointed Chief Executive John J. Ray III, a restructuring expert who took over after the bankruptcy filing, said on Saturday that the company was working with law enforcement and regulators to mitigate the problem, and was making “every effort to secure all assets, wherever located.”

The exchange’s dramatic fall from grace has seen its 30-year-old founder Sam Bankman-Fried, known for his shorts and T-shirt attire, morph from being the poster child of crypto’s successes to the protagonist of the industry’s biggest crash.

Bankman-Fried, who lives in the Bahamas, has also been the subject of speculation about his whereabouts and he denied rumors on Twitter that he had flown to South America. When asked by Reuters on Saturday whether he had flown to Argentina, he responded in a text message: “Nope”. He told Reuters he was in the Bahamas.

The turmoil at FTX has seen at least $1 billion of customer funds vanish from the platform, sources told Reuters on Friday. Bankman-Fried had transferred $10 billion of customer funds to his trading company, Alameda Research, the sources said.

New problems emerged on Saturday when FTX’s U.S. general counsel Ryne Miller said in a Twitter post that the firm’s digital assets were being moved into so-called cold storage “to mitigate damage upon observing unauthorized transactions.”

Cold storage refers to crypto wallets that are not connected to the internet to guard against hackers.

Blockchain analytics firm Nansen said on Saturday it saw $659 million in outflows from FTX International and FTX U.S. in the preceding 24 hours.

Crypto exchange Kraken said on Twitter on Sunday that it froze the accounts of FTX, Alameda Research and their executives in order “to protect its creditors.”

The exchange did not immediately reply to a request for comment on the holdings of those accounts.

In its bankruptcy petition, FTX Trading said it has $10 billion to $50 billion in assets, $10 billion to $50 billion in liabilities, and more than 100,000 creditors.

A document that Bankman-Fried shared with investors on Thursday and was reviewed by Reuters showed FTX had $13.86 billion in liabilities and $14.6 billion in assets. However, only $900 million of those assets were liquid, leading to the cash crunch that ended with the company filing for bankruptcy.

The collapse shocked investors and prompted fresh calls to regulate the cryptoasset sector, which has seen losses stack up this year as cryptocurrency prices collapsed.

Bitcoin fell below $16,000 for the first time since 2020 on Wednesday, after Binance abandoned its rescue deal for FTX.

On Sunday it was trading around $16,400, down by more than 75% from the all-time high of $69,000 it reached in November last year. (This story has been refiled to fix the byline)

(Reporting by Jasper Ward in the Bahamas; Additional reporting by Maria Ponnezhath and Jyoti Narayan in Bengaluru and Rodrigo Campos in New York; Writing by Megan Davies; Editing by Daniel Wallis)

(Reuters) – Cryptocurrency exchange Binance has stopped accepting deposits of FTX’s FTT token on its platform, its chief executive Changpeng Zhao said on Sunday, urging other rival exchanges to do the same.

FTX, which filed for bankruptcy on Friday, was engulfed in more chaos on Saturday when the crypto exchange said it had detected unauthorized access and analysts said hundreds of millions of dollars of assets had been moved from the platform in “suspicious circumstances”.

“(Binance) has stopped FTT deposit, to prevent potential of questionable additional supplies affecting the market. We will monitor the situation,” CEO Zhao said in a tweet.

“FTT contract deployers moved all remaining FTT supply worth $400 million, which should be unlocked in batches. Not too sure what’s going on,” he added, in another tweet.

(Reporting by Shubham Kalia in Bengaluru;Editing by Elaine Hardcastle)

By Summer Zhen, Vidya Ranganathan and Elizabeth Howcroft

HONG KONG/SINGAPORE/LONDON (Reuters) – FTX was engulfed in more chaos on Saturday when the crypto exchange said it had detected unauthorized access and analysts said hundreds of millions of dollars of assets had been moved from the platform in “suspicious circumstances”.

FTX filed for bankruptcy on Friday, one of the highest profile crypto blowups, after traders rushed to withdraw $6 billion from the platform in just 72 hours and rival exchange Binance abandoned a proposed rescue deal.

FTX Chief Executive John J. Ray III said on Saturday that the company was working with law enforcement and regulators to mitigate the problem, and was making “every effort to secure all assets, wherever located.”

“Among other things, we are in the process of removing trading and withdrawal functionality,” he said.

The exchange’s dramatic fall from grace has seen its 30-year-old founder Sam Bankman-Fried, known for his shorts and T-shirt attire, morph from being the poster child of crypto’s successes to the protagonist of the industry’s biggest crash.

Bankman-Fried, who lives in the Bahamas, has also been the subject of speculation about his whereabouts and he denied rumors on Twitter that he had flown to South America. When asked by Reuters whether he had flown to Argentina, he responded in a text message: “Nope”. He told Reuters he was in the Bahamas.

The turmoil at FTX has seen at least $1 billion of customer funds vanish from the platform, sources told Reuters on Friday. Bankman-Fried had transferred $10 billion of customer funds to his trading company, Alameda Research, the sources said.

New problems emerged on Saturday when FTX’s U.S. general counsel Ryne Miller said in a Twitter post that the firm’s digital assets were being moved into so-called cold storage “to mitigate damage upon observing unauthorized transactions.”

Cold storage refers to crypto wallets that are not connected to the internet to guard against hackers.

Blockchain analytics firm Nansen said it saw $659 million in outflows from FTX International and FTX U.S. in the last 24 hours.

A separate blockchain analytics firm Elliptic said that around $515 million worth of cryptoassets were “suspected to have been stolen,” while $186 million were likely moved into secure storage by FTX.

Crypto exchange Kraken said: “We can confirm our team is aware of the identity of the account associated with the ongoing FTX hack, and we are committed to working with law enforcement to ensure they have everything they need to sufficiently investigate this matter.”

FTX was not immediately available for comment about the outflows or Kraken’s statement.

In its bankruptcy petition, FTX Trading said it has $10 billion to $50 billion in assets, $10 billion to $50 billion in liabilities, and more than 100,000 creditors. Ray, a restructuring expert, was appointed to take over as CEO.

A document that Bankman-Fried shared with investors on Thursday and was reviewed by Reuters showed FTX had $13.86 billion in liabilities and $14.6 billion in assets. However, only $900 million of those assets were liquid, leading to the cash crunch that ended with the company filing for bankruptcy.

The collapse shocked investors and prompted fresh calls to regulate the cryptoasset sector, which has seen losses stack up this year as cryptocurrency prices collapsed.

“Things will continue to simmer after the FTX crash,” said Alan Wong, operations manager of Hong Kong Digital Asset Exchange.

“With a gap of $8 billion between liabilities and assets, when FTX is insolvent, it will trigger a domino effect, which will lead to a series of investors related to FTX going bankrupt or being forced to sell assets.”

Crypto market maker Jump said on Twitter late on Saturday that it had an undisclosed exposure to FTX, adding that the firm remains well capitalized.

MARKET FALLOUT

Since its founding in 2019, FTX had raised more than $2 billion from top investors including Sequoia, SoftBank, BlackRock and Temasek. In January, FTX had raised $400 million from investors at a $32 billion valuation.

SoftBank and Sequoia Capital said they were marking their investments in FTX down to zero.

Cryptocurrency exchange Coinbase Global Inc will also write off the investment its ventures arm made in FTX in 2021, according to a person familiar with the matter.

Bitcoin fell below $16,000 for the first time since 2020 after Binance abandoned its rescue deal for FTX on Wednesday.

On Saturday it was trading around $16,800, down by more than 75% from the all-time high of $69,000 it reached in November last year.

FTX’s token FTT plunged by around 91% this week. Shares of cryptocurrency and blockchain-related firms have also declined.

“We believe cryptocurrency markets remain too small and too siloed to cause contagion in financial markets, with an $890 billion market cap in comparison to U.S. equity’s $41 trillion,” Citi analysts wrote.

“Over four years, FTX raised $1.8 billion from venture capital and pension funds. This is the primary way financial markets could suffer, as it may have further minor implications for portfolio shocks in a volatile macro regime.”

The U.S. securities regulator is investigating FTX.com’s handling of customer funds, as well its crypto-lending activities, a source with knowledge of the inquiry said.

Hedge fund Galois Capital had half its assets trapped on FTX, the Financial Times reported on Saturday, citing a letter from co-founder Kevin Zhou to investors and estimating the amount to be around $100 million. Pain in crypto land https://graphics.reuters.com/GLOBAL-MARKETS/THEMES/lbvggrkadvq/chart.png

(Additional reporting by Angus Berwick and Carolina Mandl in New York; Editing by Pravin Char, Megan Davies and Daniel Wallis)

(Reuters) – FTX-affiliated crypto trading firm Alameda Research’s Chief Executive Officer Caroline Ellison and senior FTX officials knew that the crypto exchange had lent Alameda its customer funds to help meet liabilities, the Wall Street Journal reported on Saturday.

Reuters reported Friday that FTX founder and former CEO Sam Bankman-Fried had secretly transferred $10 billion of customer funds from FTX to Alameda.

Ellison told employees in a video meeting on Wednesday that she, Bankman-Fried, and two other executives, Nishad Singh and Gary Wang were aware of the decision to move customer funds to Alameda, the Journal said, citing people familiar with the matter.

FTX filed for U.S. bankruptcy protection early Friday and Bankman-Fried resigned as chief executive.

FTX and Alameda Research did not immediately respond to Reuters’ requests for comment.

(Reporting by Kanjyik Ghosh in Bengaluru; editing by Diane Craft)

NEW YORK (Reuters) – FTX founder Sam Bankman-Fried told Reuters on Saturday that he was in the Bahamas, denying speculation on Twitter that he had flown to South America after the exchange filed for bankruptcy and he was removed as chief executive.

When asked by Reuters whether he had flown to Argentina, Bankman-Fried responded in a text message: “Nope”. He told Reuters he was in the Bahamas.

(Reporting by Angus Berwick)

By Angus Berwick

New York (Reuters) – At least $1 billion of customer funds have vanished from collapsed crypto exchange FTX, according to two people familiar with the matter.

The exchange’s founder Sam Bankman-Fried secretly transferred $10 billion of customer funds from FTX to Bankman-Fried’s trading company Alameda Research, the people told Reuters.

A large portion of that total has since disappeared, they said. One source put the missing amount at about $1.7 billion. The other said the gap was between $1 billion and $2 billion.

While it is known that FTX moved customer funds to Alameda, the missing funds are reported here for the first time.

The financial hole was revealed in records that Bankman-Fried shared with other senior executives last Sunday, according to the two sources. The records provided an up-to-date account of the situation at the time, they said. Both sources held senior FTX positions until this week and said they were briefed on the company’s finances by top staff.

Bahamas-based FTX filed for bankruptcy on Friday after a rush of customer withdrawals earlier this week. A rescue deal with rival exchange Binance fell through, precipitating crypto’s highest-profile collapse in recent years.

In text messages to Reuters, Bankman-Fried said he “disagreed with the characterization” of the $10 billion transfer.

“We didn’t secretly transfer,” he said. “We had confusing internal labeling and misread it,” he added, without elaborating.

Asked about the missing funds, Bankman-Fried responded: “???”

FTX and Alameda did not respond to requests for comment.

In a tweet on Friday, Bankman-Fried said he was “piecing together” what had happened at FTX. “I was shocked to see things unravel the way they did earlier this week,” he wrote. “I will, soon, write up a more complete post on the play by play.”

At the heart of FTX’s problems were losses at Alameda that most FTX executives did not know about, Reuters has previously reported.

Customer withdrawals had surged last Sunday after Changpeng Zhao, CEO of giant crypto exchange Binance, said Binance would sell its entire stake in FTX’s digital token, worth at least $580 million, “due to recent revelations.” Four days before, news outlet CoinDesk reported that much of Alameda’s $14.6 billion in assets were held in the token.

That Sunday, Bankman-Fried held a meeting with several executives in the Bahamas capital Nassau to calculate how much outside funding he needed to cover FTX’s shortfall, the two people with knowledge of FTX’s finances said.

Bankman-Fried confirmed to Reuters that the meeting took place.

Bankman-Fried showed several spreadsheets to the heads of the company’s regulatory and legal teams that revealed FTX had moved around $10 billion in client funds from FTX to Alameda, the two people said. The spreadsheets displayed how much money FTX loaned to Alameda and what it was used for, they said.

The documents showed that between $1 billion and $2 billion of these funds were not accounted for among Alameda’s assets, the sources said. The spreadsheets did not indicate where this money was moved, and the sources said they don’t know what became of it.

In a subsequent examination, FTX legal and finance teams also learned that Bankman-Fried implemented what the two people described as a “backdoor” in FTX’s book-keeping system, which was built using bespoke software.

They said the “backdoor” allowed Bankman-Fried to execute commands that could alter the company’s financial records without alerting other people, including external auditors. This set-up meant that the movement of the $10 billion in funds to Alameda did not trigger internal compliance or accounting red flags at FTX, they said.

In his text message to Reuters, Bankman-Fried denied implementing a “backdoor”.

The U.S. Securities and Exchange Commission is investigating FTX.com’s handling of customer funds, as well its crypto-lending activities, a source with knowledge of the inquiry told Reuters on Wednesday. The Department of Justice and the Commodity Futures Trading Commission are also investigating, the source said.

FTX’s bankruptcy marked a stunning reversal for Bankman-Fried. The 30-year-old had set up FTX in 2019 and led it to become one of the largest crypto exchanges, accumulating a personal fortune estimated at nearly $17 billion. FTX was valued in January at $32 billion, with investors including SoftBank and BlackRock.

The crisis has sent reverberations through the crypto world, with the price of major coins plummeting. And FTX’s collapse is drawing comparisons to earlier major business meltdowns.

On Friday, FTX said it had turned over control of the company to John J. Ray III, the restructuring specialist who handled the liquidation of Enron Corp – one of the largest bankruptcies in history.

(Reporting by Angus Berwick; editing by Paritosh Bansal and Janet McBride)

(Reuters) – Collapsed crypto exchange FTX said on Saturday it was moving funds into offline storage following a series of “unauthorized transactions”, with analysts saying millions of dollars worth of assets had been withdrawn from the platform.

FTX U.S. general counsel Ryne Miller said in a tweet on Saturday that the exchange was expediting the process of shifting all digital assets into cold storage “to mitigate damage upon observing unauthorized transactions.”

Cold storage refers to crypto wallets that are not connected to the internet to guard against hackers.

Late on Friday, Miller tweeted that he was “investigating abnormalities with wallet movements related to consolidation of FTX balances across exchanges.”

Figures from Singapore-based analytics firm Nansen showed a one-day net outflow from FTX of about $266 million, with $73 million withdrawn from FTX U.S. alone.

FTX did not respond to a Reuters request for comment.

Prior to Miller’s tweets, FTX officials appeared to confirm rumors of a hack on the firm’s Telegram channel, according to a CoinDesk report which said that the exchange had instructed customers to delete FTX apps and avoid its website.

“FTX has been hacked,” an account administrator in the FTX Support Telegram channel wrote in a message, according to CoinDesk.

Reuters could not immediately verify the details posted on FTX’s private Telegram channel.

FTX, affiliated crypto trading firm Alameda Research and about 130 of its other companies have filed for bankruptcy court protection from creditors in Delaware, FTX said on Friday.

The distressed crypto trading platform had struggled to raise billions as traders withdrew $6 billion in crypto tokens from the platform in just 72 hours and rival exchange Binance abandoned a proposed rescue deal this week.

(Reporting by Akriti Sharma in Bengaluru; Editing by William Mallard and Pravin Char)

By Hannah Lang

(Reuters) – Sam Bankman-Fried earned a reputation as savior of the crypto industry when he bailed out two platforms earlier this year. But when FTX, the exchange he co-founded and led until Friday, needed a lifeline, none was forthcoming.

Until this week, the 30-year-old American was seen as a darling in digital assets who amassed billions in personal wealth by running one of the world’s largest crypto platforms. But as traders rushed to withdraw funds from FTX, Bankman-Fried was in denial and told investors he was convinced the business would be rescued, according to a source familiar with the situation. By Friday, FTX had filed for bankruptcy. He apologized, repeatedly.

“Nobody was saying that anything was wrong with SBF,” said Marius Ciubotariu, co-founder of the Hubble protocol, a decentralized lending platform. The company’s collapse caught markets by surprise because Bankman-Fried was seen as a business-savvy founder adept at striking deals, he said.

Known in financial circles by his initials, SBF, Bankman-Fried had become a prominent and unconventional figure in the industry. He sported his signature wild hair, t-shirts and shorts on panel appearances with statesmen like former U.S. President Bill Clinton and former British Prime Minister Tony Blair, as well as supermodel Gisele Bundchen. Bankman-Fried also quickly became one of the largest Democratic donors in the United States, contributing $5.2 million to President Joe Biden’s 2020 campaign.

The crypto wunderkind started his career at Jane Street Capital, a choice he has said was influenced by a desire to make money to pursue his interest in effective altruism, a movement that encourages people to prioritize donations to charities.

He amassed a fortune, estimated as high as $26.5 billion by Forbes a year ago, by taking advantage of the price differences in bitcoin in Asia and the United States. Bankman-Fried eventually started crypto trading firm Alameda Research in 2017 and founded FTX a year later. It was valued in January at $32 billion.

FTX’s meltdown sent bitcoin plunging to a two-year low this week amid concern that the company’s woes will spread to other crypto firms. Employees were blindsided by its collapse, with some sending apologetic notes to clients expressing shock at what had happened, according to a person familiar with the matter.

FTX appointed John J. Ray III, a restructuring expert, as CEO on Friday. He oversaw the liquidation of Enron, the energy trading giant that collapsed in scandal and bankruptcy in 2001.

“A lot of people have compared this to Lehman – I would compare it to Enron,” said former Treasury Secretary Larry Summers in an interview with Bloomberg TV.

For all his recent celebrity endorsements, notoriety and big-name backers, Bankman-Fried was not confident about FTX’s prospects back in its early days.

“I thought we would fail,” Bankman-Fried said at a June conference weeks before FTX and Alameda extended lifelines to two struggling crypto platforms. “I thought we would fail because no one would ever use it.”

(Reporting by Hannah Lang in Washington; additional reporting by Anirban Sen in New York; Editing by Lananh Nguyen and Stephen Coates)

By Alun John and Hannah Lang

LONDON (Reuters) – Crypto exchange FTX filed for U.S. bankruptcy protection on Friday and its founder Sam Bankman-Fried resigned as chief executive, after the biggest blowup in the crypto industry drew calls for tighter regulation.

The distressed crypto trading platform had struggled to raise billions to stave off collapse as traders rushed to withdraw $6 billion from the platform in just 72 hours and rival exchange Binance abandoned a proposed rescue deal this week.

FTX, its affiliated crypto trading firm Alameda Research, and about 130 of its other companies have commenced voluntary Chapter 11 bankruptcy proceedings in Delaware, the company said in a statement on Twitter on Friday.

It was an abrupt fall from grace for a company that was once a darling of the crypto industry. FTX raised $400 million from investors in January, valuing the company at $32 billion. It attracted money from investors such as Singapore state investor Temasek and the Ontario Teachers’ Pension Plan as well as celebrities and sports stars.

Bankman-Fried, 30, known for his trademark shorts and t-shirt attire, has morphed from being the poster child of crypto’s successes to the protagonist of the industry’s highest-profile crash.

“The shock was that this guy was the face of the crypto industry and it turned out that the emperor had no clothes,” said Thomas Hayes, managing member at Great Hill Capital LLC in New York. (For more reactions, click )

The week’s turmoil hit already-struggling cryptocurrency markets, sending bitcoin to two-year lows. Bitcoin dropped after FTX’s announcement and was down 4.3% at $16,803 on Friday afternoon.

Shares of cryptocurrency and blockchain-related firms also dropped on the news.

FTX’s token FTT plunged 30% on Friday to $2.57, facing an 88% weekly loss.

Bankman-Fried, whose net worth was estimated as high as $26.5 billion by Forbes a year ago, repeatedly apologized.

“I’m really sorry, again, that we ended up here,” he said in a series of tweets.

Bankman-Fried did not respond to requests for comment.

POSSIBLE CONTAGION EFFECT

In its bankruptcy petition, FTX Trading said it has $10 billion to $50 billion in assets, $10 billion to $50 billion in liabilities, and more than 100,000 creditors. John J. Ray III, a restructuring expert, has been appointed to take over as CEO.

Cryptocurrency exchange Coinbase Global Inc will write off the investment its ventures arm made in FTX in 2021, according to a person familiar with the matter.

The company said earlier this week it had $15 million in deposits on FTX that were used to facilitate business operations and client trades, but that its total exposure is minimal.

“The next question is how wide of a contagion effect this is going to have on other exchanges and where the next potential losses can occur,” said John Griffin, founder of Integra FEC, which consults on financial fraud investigations.

U.S. Senator Elizabeth Warren, a Democrat who has previously criticized the crypto industry, tweeted that the implosion of FTX was a wake-up call for Congress and regulators to hold the industry and its executives accountable.

“Too much of the crypto industry is smoke and mirrors. It’s time for stronger rules and stronger enforcement to protect ordinary people,” she said.

FTX was scrambling to raise about $9.4 billion from investors and rivals, Reuters reported citing sources, as the exchange sought to save itself after customer withdrawals.

“The Chapter 11 filing is a necessary step to allow the company to assess the situation and develop plans to move forward for the benefit of stakeholders,” Ray, the new CEO, said in a Slack memo to FTX staff seen by Reuters.

Ray, 63, oversaw the liquidation of Enron after its bankruptcy filing and served as the senior officer of what became Enron Creditors Recovery Corp. He also led the bankruptcy restructuring at Nortel Networks.

He did not respond to a request for comment.

Pain in crypto land https://graphics.reuters.com/GLOBAL-MARKETS/THEMES/lbvggrkadvq/chart.png

As FTX’s troubles mounted, regulators around the world stepped in.

FTX is under investigation by the U.S. Securities and Exchange Commission, the U.S. Justice Department and the Commodity Futures Trading Commission, according to a source familiar with the investigations.

Some investors, including Sequoia and SoftBank, had already marked their investments in FTX to zero. SkyBridge Capital is working to buy back its FTX stake, the alternative investment firm’s founder, Anthony Scaramucci, said in an interview with CNBC on Friday.

The reverberations went beyond financial markets. Mercedes’ Formula One team suspended its partnership with FTX ahead of the season’s penultimate race in Brazil.

“Once Binance walked away from buying FTX after only 24 hours of due diligence the writing was on the wall for FTX,” said Antoni Trenchev, co-founder of crypto lender Nexo.

“Now we enter the next phase of the fallout, where we witness the second order effects and discover which entities were exposed to FTX and Alameda.”

(Reporting by Alun John in London and Hannah Lang in Washington; Additional reporting by Rae Wee in Singapore, Carolina Mandl and Saeed Azhar in New York, David Shepardson in Washington, Aishwarya Nair in Bangaluru, Georgina Lee in Hong Kong, Elizabeth Howcroft in London and Jasper Ward in the Bahamas; Editing by Paritosh Bansal, Louise Heavens and Matthew Lewis)